Understand how businesses forecast sales volumes and prices to estimate revenue (C)
Know the difference between price and cost (D)
Understand the impact of profit and loss on a business (B)
Research business bank accounts - what advice would you offer to a small business regarding their banking when starting up
Starter (5 mins)
Make a list of costs associated with running a bouncy castle company
Key Words (10 mins)
Add them to your spreadsheet
Information (10 mins)
When estimating the revenues, costs and profits a good business owner would use a lot of what if questions to model different scenarios. Revenue Revenue is the amount of income the business earns over a set period of time. They may be called sales revenue, turnover or sales turnover. To estimate revenues you need to predict how many sales will be made (or jobs completed) and what will be the average price that you will charge. Total Revenue = Price x Quantity Or TR = P x Q Costs Costs are split into two parts
Fixed costs – what you have to pay regardless of number of sales/jobs. Fixed costs could include rent, loan repayment, wages etc
Variable costs – vary with sales/jobs. Variable costs might include petrol for deliveries, gift wrapping etc
Total Costs = Fixed Costs + Variable Costs Or TC = FC + VC
Profit
The profit is the difference between Total Revenue and Total costs P= TR – TC If the profit ends up as a minus figure it is a LOSS.
Task (30 mins)
Use a Google spreadsheet to calculate the costs of running a small bouncy castle business
Set up fixed and variable costs in different columns
How many times would the castle need to be hired before a profit was made?
Estimating revenues, costs and profits
Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6 Lesson 7 End of Unit Test
Lesson Objectives
Starter (5 mins)
Make a list of costs associated with running a bouncy castle companyKey Words (10 mins)
Add them to your spreadsheetInformation (10 mins)
When estimating the revenues, costs and profits a good business owner would use a lot of what if questions to model different scenarios.Revenue
Revenue is the amount of income the business earns over a set period of time. They may be called sales revenue, turnover or sales turnover. To estimate revenues you need to predict how many sales will be made (or jobs completed) and what will be the average price that you will charge.
Total Revenue = Price x Quantity
Or
TR = P x Q
Costs
Costs are split into two parts
- Fixed costs – what you have to pay regardless of number of sales/jobs. Fixed costs could include rent, loan repayment, wages etc
- Variable costs – vary with sales/jobs. Variable costs might include petrol for deliveries, gift wrapping etc
Total Costs = Fixed Costs + Variable CostsOr
TC = FC + VC
Profit
The profit is the difference between Total Revenue and Total costsP= TR – TC
If the profit ends up as a minus figure it is a LOSS.
Task (30 mins)
Use a Google spreadsheet to calculate the costs of running a small bouncy castle business
Set up fixed and variable costs in different columns
How many times would the castle need to be hired before a profit was made?